Premium rise likely for small-business health insurance Costs break through state affordability cap
By M. William Salganik Sun Staff
May 20, 2005
The cost of health insurance for small employers broke through the state's affordability cap last year, triggering a process that will lead to reduced benefits or higher out-of-pocket charges for the 450,000 Marylanders covered by the policies.
The Maryland Health Care Commission, which received the data yesterday, will conduct public hearings and receive actuarial reports before deciding, probably in November, how to adjust coverage. Changes would go into effect in July 2006.
This is the first time thThursday, November 04, 2004 9:38:15 PMthe average wage, or $4,258 last year.
But health costs were at 98.9 percent of the cap in 2003, and with premiums rising faster than wages - 7.8 percent for health costs versus 4.7 percent for wages last year - the cap-busting comes as no surprise.
In other business yesterday, the commission:
Announced that Gov. Robert L. Ehrlich Jr. had approved the appointment of a former Bush administration official as its new executive director. Dr. Rex Cowdry, a health policy specialist who was associate director of the National Economic Council in the Bush White House in 2003 and 2004, will take office June 8. He replaces Barbara G. McLean, who was forced out in December after Ehrlich appointees became a majority of the commission.
Approved a $41 million expansion plan for Upper Chesapeake Medical Center in Bel Air, which will increase beds to 170 from the current 136. Lyle Sheldon, chief executive of Upper Chesapeake Health System, said that demand at the hospital was up sharply since it opened five years ago. The hospital doesn't plan to seek a rate increase to cover the project, which will be financed with bonds.
The commission has struggled for years to strike a balance between keeping policies affordable for small employers and providing a good benefits package. All small employers (50 or fewer workers) in the state that offer health insurance have to choose a state-regulated policy.
"The cost of health insurance is driving down payroll," said Phyllis Burlage, an accountant in Millersville, who said her office pays $17,256 a year to cover the full cost of HMO premiums for her, two employees and their families. "The more the insurance companies get, the less that employees get."
She said she has looked for different types of coverage - she's particularly interested in high-deductible policies linked to tax-sheltered health savings accounts - but finds they're generally not offered under Maryland's tight regulations.
"I don't know how many companies have sent me brochures or faxes, and I call them and they say, 'Maryland - oh, forget it.' "
Commission members yesterday expressed some of the same concerns.
Chairman Stephen J. Salamon noted the report showed that two dominant carriers, CareFirst BlueCross BlueShield and Mid Atlantic Medical Services Inc., had increased their share of the small-employer market to 94 percent last year.
"Ninety-four percent market share for two carriers is not in the best interest of the people of this state," he said.
Sweeping changes to the regulatory structure would require legislative approval, and Salamon said the commission would participate with lawmakers in a study of the system ordered by the General Assembly this year.
Meanwhile, the commission has to choose between increasing out-of-pocket charges or ending requirements for coverage of some services, such as substance abuse treatment.
In 2003, when costs were projected to be headed through the cap, it took the former approach.
In July 2004, the commission more than doubled the deductibles - what people have to pay before coverage kicks in - for preferred-provider health plans to $2,500 for an individual and $5,000 for a family, from $1,000 and $2,000 previously.
Co-payments, the patients' share of charges, were also raised, for example, from $35 to $100 for emergency room visits.
Yesterday's report estimated that 58.5 percent of small employers don't offer coverage at all.